Traditional equity indexes are capitalization-weighted. Larger index weights are given to companies with greater market caps, regardless of company fundamentals or other factors that affect stock performance. Factor-Based portfolios, instead, have a proclivity toward one or more of a handful of factors that have been demonstrated to outperform traditional cap-weighted indexes over long periods of time.
The factors supported by extensive academic research, supplemented by proprietary research, and used by Atlas Capital Advisors are:
A multi-factor portfolio can provide a steadier course for investors, with a lower probability of long stretches of underperformance relative to single-factor funds.When correlations are sufficiently low, creation of a diversified portfolio can soften the cyclical behavior of individual factors across business cycles – offering the potential for lower volatility and more consistency of excess return above a cap-weighted strategy.